Khaylee mamnoon (thank you very much) for making the Islamic Revolution of Iran possible.

At the beginning of the Islamic Revolution we were despondent because we did not think that we could possibly unseat the powerful Mohammad Reza Shah Pahlevi. We expected the United States to fully support Reza Shah in putting down the violently anti-American and anti-western revolt, but to our amazement he preassured Reza Shah to release political prisoners, including the Islamic revolutionaries and communists that you refer to as terrorists. And during the waves of riots and urban guerrilla warfare that were sweeping Iran, you pressured the Shah to replace military tribunals with ineffective civil trials, lift censorship and curb Savak.

We thanked Allah for your assistance, not realizing that your heaven sent weakness and ineptitude had just begun. I must admit that when we seized your embassy, we were terrified. We were quite certain that you as the leader of the most powerful nation on earth you would respond with crushing force, but fumbled and mumbled and allowed us to consolidate our hold on Iran. Your lack of a swift response made America look fearful and impotent and encouraged anti-American forces across the globe; some would even say your weak leadership prompted the Soviets to invade Afghanistan.

If I am the father of the Islamic Revolution, you sir are the grandfather, because you set the stage for our glorious victory that launched Islamic insurrgency across the globe. We are hoping that with the help of Barack Hussein Obama's appeasment our revolution with continue to spread!

As most of you are aware, he's a highly inarticulate character from Fat Albert.

"Why," you may ask, "are you interested in a candidate that lacks grace and charm?"

After witnessing the most charismatic, articulate and inspiring president since JFK in action, I decided that it would benefit us to have a president whose lack of charm would force us to focus on the merit (or lack of merit) of his policies. Unfortunately Obama's unmatched charisma has allowed him sell disastrous economic policies to the American public. Without Obama's rhetorical skills, Mushmouth would be unable to justify policies that were hastening America's race towards financial insolvency.

Owing to our economic crisis and obesity epidemic, the Obama administration required that the Burger King resign as the the CEO and hereditary monarch of the Burger Kingdom. Inspite of record profits, Obama has declared his intentions of granting a $1.5 billion dollar bail out to Burger King with a mandate that they shift production to environmentally friendly, low calorie tofu burgers.

When asked what inspired him to take this bold course of action, President Obama declared "after forcing Richard Wagoner, the CEO of General Motors to step down, I asked myself why not mandate CHANGE in other corporations. I was undecided untill Secretary of State Clinton brought it to my attention that the Burger King was a sexist, racist, classist, homophobic white male. Secretary of State Clinton and I will work with the Department of Diversity to find a suitable replacement that represents the new America..."

It's French Revolution time. The White House put General Motors CEO Richard Wagoner's head on the guillotine this morning, when it required his resignation as a condition for further bailout money. Buried in the coverage was the fact that technically Wagoner will have to stay on board at his $1-a-year salary, because if he really resigned he'd be paid millions in severance under the terms of his contract, which the White House doesn't want either. Even the Washington Post called the move "an extraordinary intervention of the federal government into the management of a private company." The stock market dropped about 300 points as a result, ending its rally.
Pretty unbelievable. It all started with Rahm Emmanuel's comment about never wanting a serious crisis to go to waste and it took off from there ... from billions in economic stimulus and bailouts ... to returned bonuses and CEO resignations ... to trial balloons about global regulation of markets and nationalization of the banks ... to the unprecedented size and unlimited scope of the proposed federal budget and trillions of dollars of deficits. The administration's plans—in just the first two months—include wholesale federal intervention in the healthcare system, education, the energy sector, housing, and the financial markets.

It's a textbook case of overreaching by the Democrats. The problem is the Republicans haven't called it that, not yet. There's not a peep in protest. Doesn't anybody care?

Where have all the free-market capitalists gone? Where are all the advocates for limited government? With Obama's proposed expansion of the federal government into nearly every sector of our economy while running up trillions in debt, you'd think we'd hear screams from the advocates of pay-as-you-go spending and the deficit hawks. But the silence is deafening.
Perhaps all the Republicans in Congress who ran up the budget deficits under President Bush #43 feel that they can't speak up now and say that the White House's approach is wrong. Have they fallen into the Democrats' trap that they're "hypocrites" if they speak out for free-market reforms and for reducing our deficits? That's the only reason I can come up with to explain the silence.

Republicans have stood up for fiscal sanity before. Remember President Bush #41 and the 1990 budget deal, the Gramm-Rudman-Hollings spending caps, and "sequestration" of government funds if spending exceeded responsible levels? Republicans need to reclaim the mantle of fiscal conservatism and free-market capitalism. We're not all socialists yet. It's not too late.
The overreaching by the left is breathtaking, but the radical turn away from free markets is truly astonishing. During the Clinton years, Treasury Secretary Robert Rubin took a decidedly capitalist approach to the economy, and apparently taught Tim Geithner and Larry Summers everything he knew. John Heilemann in New York magazine points this out about Obama's economic team and the sharp veer they're on:

When Obama picked Geithner and Summers as his top two econo-poobahs, the main knock against them came from the left: They were both protégés of Bob Rubin. And, to an extent, it was true. Both had worked under Rubin in the Clinton administration. Both considered him a close friend, a mentor, a rabbi. Both had advocated the core policy positions that defined Rubin's time in government under Bill Clinton: free markets, free trade, globalization, deregulation, fiscal discipline = good; big deficits, protectionism, xenophobia, class warfare = bad. In this sense, they were proponents of what became known as Rubinomics.

Two months into the Obama era, however, it's hard to detect many traces of the Rubin doctrine in what the new president and his people have done or are planning to do in the future. The administration proposes to run a $1.17 trillion deficit in 2010. It intends to reregulate the financial industry. The reduction of income inequality is at the core of its tax and spending proposals. Its budget plan reflects "the largest commitment [to public investment] in 40 years," notes Bob Reich. And it imagines a level of direct government involvement in the market (and particularly in the banking sector, nationalization or no) that would have Rubin spinning in his grave—if he weren't still kicking, that is.

He is still kicking, as a director at Citigroup, which now makes him toxic to anyone in the Democratic Party. In their own minds, they've gone down the antibusiness path so far that they'd be "hypocrites" to listen to any CEO at this point. We're left hoping that the Germans and the French talk some sense into President Obama at the G-20 summit, since they've already signaled that they have no interest in the further deficit spending that he's requesting. What an irony that would be—to be told by two of the biggest welfare-state economies in the world that we're spending too much. Who would have guessed that the nation that brought us the French Revolution would be the one telling us we've gone too far?

In several posts I accused Obama of pursuing socialist economic policies. After reading up on comparative economics, I realize that this accusation was unsound and slanderous. So, the Chicago Freedom Forum is offering Obama and his supporters an official retraction and apology:

Obama's policies are not truly socialist, they better reflect the tenants of fascist economics. I challenge you to read these excerpts from wikipedia's article on the economics of fascism and tell me with a straight face that the Obama administration's economic policies do not represent many of the tenants of fascist economics!

Historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social."[26] Fascist governments encouraged the pursuit of private profit and offered many benefits to large businesses, but they demanded in return that all economic activity should serve the national interest.[27]

An inherent aspect of fascist economies was economic dirigisme[22], meaning an economy where the government exerts strong directive influence, and effectively controls production and allocation of resources. In general, apart from the nationalizations of some industries, fascist economies were based on private property and private initiative, but these were contingent upon service to the state.[23]

In 1929, Italy was hit hard by the Great Depression. The Italian economy, having just emerged from a period of monetary stabilization, was not ready for this shock. Prices fell and production slowed. Unemployment rose from 300,787 in 1929 to 1,018,953 in 1933.[37]Trying to handle the crisis, the Fascist government nationalized the holdings of large banks which had accrued significant industrial securities.[38] The government also issued new securities to provide a source of credit for the banks and began enlisting the help of various cartels (consorzi) that had been created by Italian business leaders since 1922.

The government offered recognition and support to these organizations in exchange for promises that they would manipulate prices in accordance with government priorities.[39] A number of mixed entities were formed, called instituti or enti nazionali, whose purpose it was to bring together representatives of the government and of the major businesses. These representatives discussed economic policy and manipulated prices and wages so as to satisfy both the wishes of the government and the wishes of business.

This economic model based on a partnership between government and business was soon extended to the political sphere, in what came to be known as corporatism

Mussolini also adopted a Keynesian policy of government spending on public works to stimulate the economy. Between 1929 and 1934, public works spending tripled to overtake defense spending as the largest item of government expenditure.[44]

Finally, Italy's involvement in World War II as a member of the Axis powers required the establishment of a war economy. This put severe strain on the corporatist model, since the war quickly started going badly for Italy and it became difficult for the government to persuade business leaders to finance what they saw as a military disaster.

Monday, March 30, 2009

Demagogues like Luis Gutierrez and Jorge Ramos present the issue of immigration enforcement as a black-and-white dichotomy - implying that the only two options are draconian raids and roundups or blanket amnesty + complete non-enforcement. Their aim of this dishonest dichotomy is to to push through a flawed and unpopular amnesty. The greatest flaw being that (that amnesty of 1986 shows that) any amnesty that occurs before the securing of border is secured will lead to another even larger future amnesty.

On the other hand, Dr. Ron Paul presents a third way. As a man who is committed to economic and social freedom, Dr. Paul's instinctively leans towards liberal immigration policies, but in the context of our strained welfare state and the erosion of popular sovereignty, Dr. Paul has shifted towards more restrictive immigration policies, echoing the sentiments of Milton Friedman who stated "You cannot simultaneously have free immigration and a welfare state."

As a committed civil libertarian, he opposes the implementation of a national ID and draconian enforcement policies, such as raids and roundups. As a man well versed in economics, Dr. Paul instead focuses on addressing the economic incentives that promote unsustainable immigration patterns. By addressing these incentives, cost-effective immigration control can be achieved without resorting to brutal raids and roundups by utilizing one or more of the following means:

1. By forcing employers to pay for the welfare benefits of the undocumented (or even documented) immigrants that they employ, they will bear the true cost of subsidized "cheap labor." The immediate benefit will be a reduction in welfare expenses. And over time, this will ensure that the most productive and adaptive immigrants will remain and the least productive will return to their countries of origin, as was the case before the onset of a bloated welfare state.

2. Fine employers who hire undocumented immigrants, which will eliminate the most powerful magnet for undocumented immigration: easy access to jobs. And in order to be humane and economical, leave the option for employers to sponsor their employees.

3. Eliminate the powerful magnet of birthright citizenship (via the reinterpretation of the 14th amendment) and require that one parent be a citizen, such as the following democratic nations have done: Australia, Belgium, the Czech Republic, France, Germany, Ireland, Italy, Japan, Norway, Poland, South Korea, Sweden, Switzerland and the United Kingdom.

By eliminating these magnets, the end result will be a shift towards a smaller, more productive immigrant labor force without the use of raids and roundups. And in the end it will create the conditions that will make an amnesty possible. Dishonest dichotomies are for politicians and progressives, where as economics see in color.

Scroll down to check out this interview with Dr. Paul - once again he is on the ball!

There's nothing inherently wrong with a big business as long as they arrived at and maintain their size by providing goods and services that the public desires. Look at the Fortune 500 from today and from 30 years ago and you will see a long list of "corporate monopolies" that are no longer on the list or no longer even exist, because newer, more innovative companies provided better, more cost effective goods and services.

A big business is only problematic when it:

1. Arrived at or maintains it size and market dominance through government subsidies, preferential treatment, i.e. "corporate welfare" and anti-competitive regulations that limit the entry of new players into the market.

2. It has a truly dangerous product that the market or the government has failed to regulate. In the age of the instantaneous global communication, vigilant safety advocacy groups and an increasingly educated public, the market is usually quick to punish companies that produce truly dangerous products. China's loss of hundreds of millions of dollars because of the lead scare improved the safety of its products to a degree and at a speed far greater than any corrupt regulatory body could hope to do. And those that provided lead free products from the beginning gained a competitive advantage, profited and grew.

Sunday, March 29, 2009

Politicians and pundits such as Luis Gutierrez have framed the immigration debate as a dualistic clash between "pro-immigrants" and "anti-immigrants." "Pro-immigrants" are defined as anyone who supports high immigration numbers and is opposed to the mast basic enforcement of existing laws. Whereas "anti-immigrants" are defined as anyone who supports a more moderate, controlled flow of immigrants that inevitably involves some form of enforcement.

I am confident that after viewing the data in this post you will agree with me that the real choice is between policies that create a more economically and socially welcoming environment for immigrants via a more moderate, controlled immigration flow and unsustainable policies that create an economically and socially unwelcoming environment via a large, uncontrolled flow of low-skill immigrants.

For our discussion we will focus on California, because it highlights the best example of a state that has pursued "pro-immigrant" policies, largely to the detriment of its immigrant population. And, it is said that (for good or for bad) California is 10 years ahead of the rest of the United States. So, we can hope that with intellectual honesty and open debate, the rest of the country will be able to learn from California's disastrous policies

One of the great lessons of economics is that policies and programs should be judged on the real outcomes that they produce, not on their intended effects. While the intentions of California's "pro-immigrants" have been to offer the best possible economic and social environment for immigrants, the actual outcome of their policies have been overwhelmingly negative.

By eliminating negative incentives via non-enforcement of basic immigration laws and by offering a vast array of social services regardless of status, California transformed itself into a low skill immigration magnet, which has greatly increased the supply of low skill workers. Predictably this has depressed the wages and working conditions of immigrant workers, while simultaneously straining basic social services that so many immigrant families rely upon. Initially this induced an exodus of California's non-immigrant working class. But, soon the total saturation of California's low skill labor market prompted an exodus of immigrant workers to other states, such as North Carolina and Arkansas that respectively witnessed a 394% and a 337% growth in its Hispanic population. Clearly, immigrant workers were voting with their feet against the economic changes that were transpiring in California.

The collapse of California's social service system is seen in the continuous closure of hospitals, which has been felt most heavily by Latinos. Between 1990 - 2006, 70 hospitals have closed in California, with 50 of the closures occurring in Southern California and at least 27 of them occurring in Los Angeles County.

Virtually every analyst attributes this to the skyrocketing costs of providing health-care for the growing number of uninsured Californians. By 2007 this number had surged to 6.6 million or 20% of California's population (or 37.1% of individuals under 65), placing it 46 out of 50 in the ranking of states with uninsured residents. Among Hispanics under 65 the number of uninsured residents is 55.7%. In 2004 alone, the cost of providing health care to the uninsured was $5 billion with at least $1.5 billion going to the undocumented immigrants. I must emphasize thatthe point is NOT to lay the blame on poor immigrants; a massive influx of low wage workers would have had the same effect regardless if they were from Pittsburgh, Paris or Puebla. The point is to highlight the insanity of calling any policy that encourages the entry of millions of low wage workers into an already strained social welfare system "pro-immigrant."

"Progressives" will declare that this crisis is evidence of the necessity of a universal health care system, but given California's deep fiscal deficit, a costly expansion of coverage is simply impossible. The only financially feasible answer is to minimize the growth of residents who are dependent on state services. Had California honestly and intelligently weighed the painful trade off between open borders and generous social services, it would have sought to provide the best possible health care for a smaller immigrant population. But by ignoring painful choices and difficult compromises and by pursuing so called "pro-immigration" policies, California has set the stage for a decline in the coverage and quality of health care for its most vulnerable immigrant populations.

In addition, the ranking of California's previously respected public education system has declined to 49 out of 50. And by most indications, the majority of Latinos are enrolled in the worst schools within this already sub-par system, which is surely a factor in the 50% dropout rate among Latino students within the LA County school system.With 60% of Mexican immigrants lacking a high school education, California has now become the number 1 state in adults who have not completed high school. And the cost of educating California's 3.3 million undocumented students has risen to $7.7 billion. Again, the point isNOT to blame immigrants, rather it's to question the wisdom of imposing the massive fiscal and social burden of adding millions of children from totally uneducated families to an already strained school system. In the end those who suffer the most will be Hispanics who are trapped in California's wretched inner-city schools. A smaller, less concentrated Latino population could have allowed for more profound and rapid cultural assimilation, which would have produced educational and economic outcomes that were far closer to mainstream American norms. But, a critical demographic mass has been reached in California that greatly limits opportunities for assimilation.

California's Hispanic gang epidemic is the product of two interrelated factors: lax borders and limited cultural assimilation. In regards to the first factor, the same porous border that allows millions of good, hard working immigrants to enter the United States also allows for the entry of criminals and gangs, such as the notoriously violent MS 13. And as previously stated the demographic concentration discourages the cultural assimilation that would produce social and economic outcomes comparable to mainstream Americans. And needless to say, the majority of the victims of the violence and lawlessness of these gangs are hard working, law abiding Hispanic immigrants.
Last but certainly not least, one of the major unintended consequences of high volume immigration is to increase the already huge backlog in America's already overburdended and inefficient immigration bureacracies. This backlog has increased the time and expenses that immigrants and their families incurr during the naturalization process. And because of enedmic fraud, efforts to sponsor family members, as well as employees has become costlier and more complicated. And as the number of undocumented immigrants have surged, the capacity of America's immigration bureacracies to undertake and the willingness of the public to support amnesty has plummeted. Critics of the amnesty passionately resisted it on the grounds that prior amnesties led to even higher levels of undocumented immigration, because promises to increase post-amnesty enforcement were never met. So, paradoxically, the record volume of legal and illegal immigration have most burdened immigrants. Clearly, a more manageable volume would have allowed for a quicker, lest costly and complex naturalization process and may have even allowed for a general amnesty.
One point that we must touch upon is the growth of grassroots hostility towards immigration in the United States. Polls show that paradoxically many Americans look favorably upon hard working immigrants, but are deeply troubled by the economic and social impact of our currently immigration policies. Even those who are inclined to look favorably upon immigration are troubled by the volume and extent of illegality of the current immigration wave. Common concerns include: the security risks posed by a porous border, an erosion of the rule of law, a violation of sovereignty, growing fiscal burdens and faltering assimilation. And interestingly, even the harshest critics, like Lou Dobbs focus their ire not on immigrants, but on politicians who have ignored the interests and desires of the American people.

This hostility has prompted grassroots actions like the push for Proposition 187 that would have denied welfare and education to undocumented immigrants. This measure won the support of the majority of Californians, including 47% of Hispanic voters, but was shot down by the courts. And the popular uproar against amnesty represented a successful grass roots revolt against a deeply unpopular policy.We can debate the merit or lack of merit of these measures, but we cannot deny that they represent an American public that is increasingly unwelcoming towards immigration. And we cannot deny that this is one of the unintended consequences of policies that have been imposed against the will of the majority of the American public. So, rather than pursue a more moderate, rational immigration flow that respects the popular will of Americans and encouraged the hospitality, generosity, tolerance and openness of the American public, these so called "pro-immigrant" politicians have engendered hostility and xenophobia not seen for generations. By so unabashedly propagating ethno-identity politics and group rights, rather than assimilation and individual rights, they are inevitably encouraged similar nationalist impulses in European-American communities. For someone who is very proud of America's history as a nation that granted unparalleled opportunities to millions of immigrants, including my own family, I find this deeply troubling. If we continue to pursue the divisive path of uncontrolled immigration and ethno-identity politics, we will become an increasingly unwelcoming nation that offers diminishing economic and social opportunities for immigrants and native born Americans alike. But if we pursue moderate, reasonable policies based on popular sovereignty, rule of law, respect for human rights and a manageable flow of immigrants, we will reawaken the very best in our great nation of immigrants.

Scroll down to view Glenn Beck's video in which he correctly points out that the Fed is greatly increasing the money supply, which will herald future inflation.

We will not see inflation for the time being, because of the drop in demand for goods and services related to the economic downturn. But, I am confident that Obama has laid the monetary foundation for major post-recession inflation.

Inflation not only is economically damaging, but it engenders political and social turmoil. In fact, most modern revolutions, from the bolsheviks in Russia, to the nazis in Germany and the coup against Allende, were preceded by acute inflation.

One of the things that amazes is the economic illiteracy that I see in even the most luminous journalists of the mainstream media. Very few approach immigration from the perspective of the 3rd Güey (clear, honest economic analysis based on empirical reality). Most based their limited analysis on race, racism and empty platitudes. Nowhere is this more clearly seen than with the 7-time Emmy winner Jorge Ramos, a charismatic, intelligent journalist from Univision. We cannot overestimate the influence that Mr Ramos holds, because an an anchor for Univision, a columnist for several Spanish newspapers, a radio commentator and a best selling author, he is the window into the political world of the United States for millions of Spanish speakers. And this is all the more true with the near absence of alternative media outlets that Spanish speakers in the United States face. This is particularly troubling because Univision is overwhelmingly liberal and pro-Obama.

After skimming through Mr. Ramos's book "The Other Face of America: Chronicles of the Immigrants Shaping Our Future, I conducted some research and came across an article in the Washington Post in which Mr. Ramos answered the questions that various readers presented him. I was very pleasantly surprised by the thoughtfulness and balance of most of the questions. But, I was quite disappointed by Mr. Ramos one-dimensional responses. Nowhere does he analyze and weigh the (social & economic) costs and benefits of immigration and nowhere does he address the legitimate concerns of the participants. And in a one instance he even falls back on unsophisticated fear mongering, which I have highlighted in red. Here are some excerpts; to view the full article scroll to the bottom of the post and click on the link:

Arlington, Va.: Don't you think there is a difference between anti-immigrant and anti-immigration? I am all for welcoming immigrants, treating them warmly and fairly, and helping them become part of our community. But I also want to lower immigration levels, because I'm concerned about the fact that the U.S. is already overcrowded--housing shortages, environmental harm, pollution, and school crowding are all the results of that crowding. But I'm certainly not anti-immigrant, and I'd like to see you make the distinction.

Jorge Ramos: The United Stated do not have too many immigrants. The immigrant population is, right now, 11 percent. In 1870 was 14 % and in 1910 was 14.7% So it is not accurate to say that there are too many immigrants in the US. Especially when they contribute so much to this economy and to the multiracial, multi-ethnic and multicultural nature of this country.

Washington, D.C.: Do you think the United States is overpopulated (as evidence by urban sprawl, the energy crunch, water shortages, traffic congestion etc.)? Middle Census Bureau projections puts the U.S. at around 400 million by 2050. Immigrants and their first-generation descendants are the primary cause of population growth (over 70%). Doesn't this have drastic ramifications on our environment?

Jorge Ramos: Overpopulated? I do not think so. What happens, in reality, is that many people are afraid that this country is going through a process of diversification. On July 1, 2059 every single ethnid group in this country (including non-hispanic whites) will become a minority.

Easton, Md.: Don't we as a people need to ask what the optimum number of people in the U.S. should be. Optimum as opposed to maximum. And then should we not work towards that number?

Jorge Ramos: We have not reached yeat the optimum number of immigrants in this country. Are people willing to pay five dollars for a tomato, 20 dollars for a hamburger, 50 dollars for a steak or pay doble or triple for rent?

Arlington, Va.: To me, amnesty to illegal immigrants is a slap in the face to legal immigrants who went about everything the right way, like my husband. We spent many years apart because neither of us believed in him working here illegally, and so we waited until we were ready to get married. Illegal immigrants are just that, illegal.

Jorge Ramos: I have a problem with the terms "illegals", "illegal immigrants" or "illegal aliens" because many people want to equate this with criminals. Immigrants are not criminals. They are in this country because they are needed in this country. Every one in this country is an accomplice of immigrants. Every one. It is unfair to criticize their presence and at the same time benefit from their work. Who harvested the food that we ate today? Who built hte house where you live? Who is taking care of our children when we go out?

Bethesda, Md.: With few exceptions, the United States is an nation of immigrants, drawn here by economic, political and/or religous opportunities. You have raised the call for adequate political and cultural representation for the Latino population in the country. How can those who are illeagal (i.e. they have broken the law by immigrating illegaly and are criminals) demand political representation? The United States was founded on the rule of law, and stands on it in total, not merely selecting the pieces that are convienent to one's particular situation.

Jorge Ramos: Immigrants work hard in this country, they pay takes, they contribute a lot to the culture and the economy of this country. Their presence highlights the true nature of the United States as a multicultural, multiethinic society. What I found difficult to understand is how an immigrant or a descendant of immigrants want to close the door behind them. To be anti-immigrant is, in fact, to be anti-American

Washington, D.C.: Sir, Are you in favor of allowing immigrants from ALL nations unrestricted access to the United States, people from Asia, Africa, etc. If we did so, we would probably have to lower the number of Latin American immigrants in order to be fair to people of other nations, for example, instead of 10 million from Mexico, we could have 2 million from Nigeria, 2 million from Cambodia, 2 million from Mexico, and so on. Mexican and American culture are not that similar that we should encourage a "merging" of Mexico and the United States, for English speakers, Spanish is not a easy language to learn, and I am sure it is true vice versa.

Jorge Ramos: The georpgraphic and political realities makes if impossible to apply the formula that you are suggesting. The priority should be to legalize, first, those who are already here. And then negotiate with Latin America a workable solution to the immigration dilemma. This is a problem that the United States can not resolve alone.

After my last posting I have to emphasize the in spite of my strong reservations about our current immigration policies, I have a great deal of respect for Mexican culture. Most Americans have a very narrow understanding of this culture. I strongly encourage you to check out this website, it has lots of great information on Mexican art, music, architecture, culture and culinary traditions.

After reading about the ground breaking research of Dr. George Borjas, it should be abundantly clear that race and national origin should be excluded from the immigration debate and our main focus should be on the human capital (skills, education & experience) of immigrants. As Dr. Borjas shows, human capital is the prime determinant of the economic and social outcome of immigrants and native born Americans alike.

So, the next logical step is to assess how our immigration policies of the last 40 years have effected the social capital of immigrants and native born Americans alike. According to Dr. Borjas, in 1960 the average immigrant living in the United States actually earned 4% more than his native born counterpart. He attributes this to the fact that in 1960 the average immigrant possessed greater human capital than the average American. But, by 1998 immigrant earnings had dropped to 34% below the American mean. Dr. Borjas attributes this to a drop in the relative human capital of immigrants via the United States' changing immigration policies. This is seen in the following figures: in 1998, 9% of the average native born males were high school drop-outs versus 33.6% of immigrant males, rising up to 60% in Mexican and Central American populations. Interestingly, the economic distribution of immigrants has become highly bifurcated; on one side, high skilled, professional immigrants earn more far more than the typical American and on the other side, a mass of uneducated immigrants earn far less. Immigrants from Mexico and El Salvador, on average earn 40% less than than natives, while immigrants from Australia earn 30% - 40% more.

Two additional, interconnected factors contribute to the drop in wages of immigrants. First, a major increase in the supply of labor, especially in fields with a large immigrant presence, such as construction and manufacturing, have depressed wages in those fields. Second, our post-industrial economy increasingly rewards skilled, specialized labor and offers increasingly low returns for unskilled labors. So, populations that on average possess less skills and education will see a decrease in earnings.

Most disturbingly, the factors discussed in the preceding paragraphs have also impeded the rate of economic assimilation of immigrant populations. Immigrants that arrived between 1955 - 1059 started off with a 10% disadvantage in wages. But, 10 years later as they advanced in their mastery of English and in their professional development, they earned 10% more than native workers. Immigrants arriving between 1975 - 1979 started off earning approximately 22% less than native workers, but within 10 years they had narrowed the gap to 12% less. But, immigrants arriving between 1985 - 1989 started off with a 23% wage gap and within 10 years the gap had actually grown by 10% to 33% less than native workers. And as predicted by their education levels, after 10 years German and Indian immigrants earn 24.5% and 17.6% more than native workers.

Dr. Borjas shows that the overall economic effect of our current immigrant policies does not so much involve economic output as it does economic distribution. Specifically, it has resulted in a redistribution of wealth away from workers who compete with immigrants towards employers and consumers who economically benefit from the depressed wages brought on by an increased supply of labor. For example, an increase in the supply of dry-wallers and painters brought down the cost of labor in those fields. This allowed construction firms and (to a lesser extent) consumers to enjoy lower labor costs, but reduced the earnings of native workers as well as established immigrant workers in the said fields.

The most important implication of approaching immigration from the perspective of social capital is the understanding the relatively high rate of social and economic pathology in the Hispanic community does not stem from race or national origin. Rather, it reflects a decrease in the education level of Hispanic immigrants coupled with a large increase in the supply of low skill labor. For example, from 1990 to 2004, the number of Hispanics in poverty rose 52 percent, accounting for 92 percent of the increase of impoverished Americans. The rate of high school drop outs hovers around 30%. And the rate of out of wedlock births for foreign born Hispanics rose from 19% in 1980 to 42% in 2003. So, paradoxically our current immigration policies have been most detrimental to social and economic welfare in Latino communities.

Changing levels of human capital have greatly altered patterns of welfare use among immigrants. In 1970 only 3% of immigrants received cash assistance, a lower level than the 5% of Americans that received assistance. But, by 2000 this trend had reserved, approximately 6.7% of Americans were receiving cash benefits, whereas 8% of immigrants were receiving the said benefits. And 15.4% of Americans were recipients of one or more welfare program, versus 22.4% of immigrants. A more detailed analysis paints a bifurcation use of welfare among immigrant groups. At one end, only 5.4% of Indian immigrants received welfare benefits and at the other end 54% of Dominican and 47.9% of Cambodian immigrants are on welfare. Unfortunately, in the age of growing entitlements, this is a very costly phenomenon. In California alone the net costs on public services is estimated at $10.5 billion or a burden of nearly $1,200 for each tax paying family. Thus, cheap imported labor amounts to a costly, market-distorting subsidy, enjoyed by select businesses, but paid for by the general public.

Dr. Borjas correctly notes that the growth of the welfare state has served as a magnet for immigrants with low human capital. Statistics indicate that in the early 1900's upwards of 38% of immigrants returned to their countries of origin. Without an extensive welfare state, this allowed for a self-selection system in which the most adaptive and productive immigrants would remain and greatly contribute to the economic welfare of the United States. But, by 1993 only 10% of immigrants were returning to their countries of origin, a number that is even smaller in families receiving government assistance. Not only does this allow for unproductive individuals to remain, this actually diminishes incentives for native born and immigrants alike to increase their skill and productivity levels. Milton Friedman best summed up this phenomena in the following sentence: "it's obvious that you can't have free immigration and a welfare state."

Dr. Borjas points out one essential but rarely discussed factor in the debate - differences in levels of human capital brought by immigrants persist for at least three generations. In other words the level of education, skills, earnings and welfare use of immigrants effects that of the 2nd and even 3rd generations. For example, first generation Indian immigrants (that arrived in 1970) earned 27.6% more than the average native workers and the 2nd generation earned 23.1% more, whereas first generation Mexican immigrants earned 27.6% less and their second generation descendant earned 19.7% less. And only 2% of second generation Indians use welfare, whereas 14% of 2nd generation Mexicans utilize welfare. And interestingly, the one social index that deteriorates from the 1st to the 2nd generation is crime. Contrary to popular perception, the crime rate of 1st generation Latino immigrants is actually lower than that of European-Americans, but the incarceration rate of the 2nd and 3rd generations is 3.5 times higher than that of European-Americans. Thus, our current immigration policies have economic and social repercussions that will span several generations.

The more I read Borges clear and compelling research, the more I am convinced that our current immigration policies are entirely based on political factors and beret of clear and rational economic goals, much to the detriment of native and immigrant populations alike. Swelling the ranks of unskilled labor depresses wages of immigrants and imposes economic burdens on tax payers via costly entitlement programs. The only interests that benefit from this transference of wealth are unscrupulous businesses and left leaning politicians seeking to expand their electoral base. And contrary to popular perception, the real anti-immigrants are politicians like Luis Gutierrez and Ted Kennedy who have placed their lust for power above the economic and social welfare of their country and even their immigrant constituencies, because as our current recessions shows, when political aspirations collide with economic realities, immigrants bear the greatest brunt of the impact.

In a recent press conference George W Bush said "I was mighty proud of holding duh record fer duh president with duh highest federal spendin' and duh largest budget deficit, so it sure did break mah heart tuh hear dat mister Obama broke mah record."

Mr. Bush went elaborated "I sure felt mighty small when I uh heard dat he had increased mah budget bah 34% percent to a record $4 trillion buckaroos. I thought I wuz number one in reckless spending, but duh Congressional Budget Office projected dat duh national debt would more than double in the next 10 years from 40% to 82% of duh GDP; I reckon' that is four times greater than Ronald Reagan's largest deficit."

"Mah only hope is dat I will stay number one fer reckless foreign entanglements, but with Obama's commitment tuh send more troops tuh Afghanistan, I am feelin' bluer than a room full of smurfs."

"There's only one thing I don't quite understand, if Obama is number one, den why do so many people say dat he is full of number two???"

Wednesday, March 25, 2009

As much as it pains me to admit it, Bush was right, Iran is part of the axis of evil.

NEW YORK, — Six Bahá’í leaders in Iran were arrested and taken to the notorious Evin prison yesterday in a sweep that is ominously similar to episodes in the 1980s when scores of Iranian Bahá’í leaders were summarily rounded up and killed.

The six men and women, all members of the national-level group that helped see to the minimum needs of Bahá’ís in Iran, were in their homes Wednesday morning when government intelligence agents entered and spent up to five hours searching each home, before taking them away.

The seventh member of the national coordinating group was arrested in early March in Mashhad after being summoned by the Ministry of Intelligence office there on an ostensibly trivial matter.

“We protest in the strongest terms the arrests of our fellow Bahá'ís in Iran,” said Bani Dugal, the principal representative of the Bahá’í International Community to the United Nations. “Their only crime is their practice of the Bahá’í Faith.”

“Especially disturbing is how this latest sweep recalls the wholesale arrest or abduction of the members of two national Iranian Bahá’í governing councils in the early 1980s -- which led to the disappearance or execution of 17 individuals,” she said.

“The early morning raids on the homes of these prominent Bahá’ís were well coordinated, and it is clear they represent a high-level effort to strike again at the Bahá’ís and to intimidate the Iranian Bahá’í community at large,” said Ms. Dugal.

Arrested yesterday were: Mrs. Fariba Kamalabadi, Mr. Jamaloddin Khanjani, Mr. Afif Naeimi, Mr. Saeid Rezaie, Mr. Behrouz Tavakkoli, and Mr. Vahid Tizfahm. All live in Tehran. Mrs. Kamalabadi, Mr. Khanjani, and Mr. Tavakkoli have been previously arrested and then released after periods ranging from five days to four months.

Arrested in Mashhad on 5 March 2008 was Mrs. Mahvash Sabet, who also resides in Tehran. Mrs. Sabet was summoned to Mashhad by the Ministry of Intelligence, ostensibly on the grounds that she was required to answer questions related to the burial of an individual in the Bahá’í cemetery in that city.

On 21 August 1980, all nine members of the National Spiritual Assembly of the Bahá’ís of Iran were abducted and disappeared without a trace. It is certain that they were killed.
The National Spiritual Assembly of the Bahá’ís of Iran was reconstituted soon after that but was again ravaged by the execution of eight of its members on 27 December 1981.

A number of members of local Bahá’í governing councils, known as local Spiritual Assemblies, were also arrested and executed in the early 1980s, before an international outcry forced the government to slow its execution of Bahá’ís. Since 1979, more than 200 Bahá’ís have been killed or executed in Iran, although none have been executed since 1998.

In 1983, the government outlawed all formal Bahá’í administrative institutions and the Iranian Bahá’í community responded by disbanding its National Spiritual Assembly, which is an elected governing council, along with some 400 local level elected governing councils. Bahá'ís throughout Iran also suspended nearly all of their regular organizational activity.

The informal national-level coordinating group, known as the Friends, was established with the knowledge of the government to help cope with the diverse needs of Iran’s 300,000-member Bahá’í community, which is the country’s largest religious minority.

As I amply demonstrated in my post, the 5 Rules of Government Growth (http://chicago-freedom-forum.blogspot.com/2009/03/libertarianism-as-means-not-end.html) the inherent nature of the modern state is to continuously and pathologically grow, consuming an ever larger share of economic output. Under moderate conservatism, the growth slows, but continues its pathological trajectory. And under "progressives" like Obama, government growth accelerates , hastening the arrival of economic ruin.

The only logical response, the only medicine for this disease is a strong, commitment to reducing the size of the state: libertarianism. Please note that this does not necessarily refer to party affiliation, rather it refers to a commitment to advancing economic and social liberty.

Inevitably most people respond "but, but the end goal of libertarians is to strip the meat as well as the fat, leaving us with a bare bones government and an unfettered free market..." This concern is equivalent to someone worrying about putting on a sweater during a snow storm, because they might get heat stroke. In this day and age, the size and the scope of the interventionist state has grown so large that we are a million miles away from the dangers of an excessively small government.

Another fundamental flaw in t he vision of those who are so concerned about the growth of libertarianism is that even IF libertarian end goals were as dastardly as "progressives" believe them to be, in the context of a pluralist democracy, very few will never be realized. Partisans of economic and social freedom would face a constant, uphill battle against powerful lobbyists and well entrenched special interests that have profited from state intervention. Policy by policy and concept by concept, libertarians would have to fight against endemic economic ignorance and nearly a century of marxist brainwashing.

Facing such an uphill battle, libertarian minded individuals would have to carefully choose their battles and focus on combating the very worst and wasteful government programs. In a pluralistic system with so many mindless statists, libertarians would rarely achieve total victory in a battle against any given policy or program; in almost every case they would have to settle for a compromise. So, rather than enacting radical change, the probably outcome would be a healthy influence on a dangerously bloated body politic.

For example, most libertarians would want to eliminate the unconstitutional federal department of education. But, given the power of teacher's unions and the extreme statism that permeates society, they would have to settle on expanding the reach of voucher programs to liberate more students from failed public schools and eliminating costly and foolish federal programs like "No Child Left Behind." And the chance of convincing the public of the net gain of legalizing all drugs would be nil, so libertarians would focus on decriminalizing marijuana.

For strategic reasons, if not for basic pragmatism, libertarians would never dream of going against the few programs or policies that had not been a total disaster, like child labor laws. They would realize that not only would their chances of success be zero, but in their failed attempt they would lose their credibility and their hard won political gains.

So, when you are freezing in the middle of the winter, put on a warm sweater and don't worry too much about heat stroke. Obama's $3.5 trillion dollar budget, our $11.13 trillion dollar national debt and the 20,466 pages of regulation in the federal register would lead me to believe that for the time being, a "bare bones government" and "unfettered capitalism" are the least of our worries.

Monday, March 23, 2009

While the left's concern for the poor is admirable, it's analysis of wealth and poverty are deeply flawed. These flaws are most readily seen in the Dependency Theory, which is frequently used by the left to explain the wealth and poverty of nations. As you'll surely recognize, the same general concepts resonate throughout leftist explanations of poverty within the United States.

This theory is based on the concepts that:

1. Poverty is imposed on third world nations by wealthy nations. Poor nations (and individuals) are victims, accordingly issues like a nation's detrimental economic choices and cultural factors are rarely, if ever discussed.

2. "Imperialist nations" such as the United States enrich themselves by usurping the natural resources of poorer nations and forcing them to buy their manufactured goods. Economic factors like productivity, human capital, economy of scale, monetary policy etc, are rarely discussed.

3. Wealth is a zero sum game - increases in the wealth of one nation equals a decrease of wealth in another nation. Trade between nations rarely if ever augment the wealth of both parties.

4. Only through greater state control of the economy and shield themselves from the global market can raise themselves from poverty.

The best argument against the Dependency Theory is the nation of South Korea.

In the early 1950's, South Korea was one of the poorest nations on the earth. Every measure of wealth and welfare were perilously low. Poverty and illiteracy were widespread and industry was virtually non-existent. Needless to say, South Korea carried one of the highest per capita debts of the world. And for many years South Korea languished in military dictatorships.

Through a combination of wise economic policies and cultural factors, South Korea surged ahead economically becoming a dynamic, innovative, export-oriented 1st world nation.

Between 1962 - 2008, South Korea's GDP grew from $3.3 billion GDP ($87 per capita) to
$371.8 billion ($27,100 per capita). During this time the poverty rate plummeted and the distribution of wealth greatly improved. And quite significantly, South Korea transformed itself from a nation that was billions of dollars in debt to the United States to a nation that loaned billions and billions of dollars to the United States.

To adequately explore the factors that brought about the "Miracle on the Han River" would require volumes of writing. But, at the risk of oversimplification, we can briefly sum them up as South Korea's focus on: education, innovative, competitiveness, modernization and market reform. And we cannot deny vital cultural factors, like an unparallelled sense of hard work, discipline, entrepreneurial zeal and a critical openness to other cultures. And conversely, nations that pursued socialist measures based on the dependency theory world view stagnated or even regressed. The best example being neighboring North Korea that vigorously pursued a policy of juche - economic self dependence.

The example of South Korea explodes most of the notions of the dependency theory. Nothing is fixed, the world is in flux. Nations and individuals are not helpless victims permanently trapped in poverty; those who choose wise economic and cultural paths can and do rise up economically. And Great nations, like the United States, that pursue unwise economic and cultural paths will decline. Just as the embrace of economic and social freedom allowed the United States to achieve unparalleled prosperity, so shall its abandonment herald our decline. And as more Americans embrace a philosophy based on coveting the wealth of others, rather than creating their own, so shall we decline. On a closing note of irony - it can even be said that South Korea is surpassing us in the export of Judeo-Christian culture; it now sends out more Christian missionaries than the United States and plays a large role in supporting western classical music! So we can only hope that South Korea will send us some prayers, as well as well as a few hundred billion dollars, so we can keep on funding all this great change!

I recommend that my readers check out the economist Max Schulz's article on the Obama administration's costly push for "green jobs."

The author doesn't doubt the need to address global warming, but he is skeptical of Obama's claims that government subsidized "green industries" will be a net producer of jobs.

He points out that in 2008 the government subsidized solar energy at $24.34 per megawatt-hour (mw/hr) and wind power at $23.37. Whereas natural gas generates energy at $ 0.25 mw/hr, coal at $0.44 and hydroelectricity at $0.67. Given the relatively low energy output of renewable energy sources, they currently provide 0.5% of our nation's energy needs. The economic implications of this are:

2. Or, if the government makes the widespread use of renewable energy sources feasible through heavy subsidies, these subsidies will result in a higher tax burden of productive industries, which also will raise the cost of production.

3. Any economist will tell you that raising the cost of production will result in a loss of jobs. And the author does not believe that the loss in private sector industrial jobs will be offset by gains in heavily subsidized "green jobs."

4. The author correctly points out that locals with higher energy costs (such as California) drive out jobs to areas with lower energy costs (such as North Carolina) and even straight out of the country.

And I would like to ad that the history of government subsidies shows that:

1. Inevitably the prime determinant of which companies (in any given field) are the recipients of government subsidies are not which are the most innovation. Rather, political connections and influence via lobbying determines who receives public funds.

2. Government subsidies limit market competition and market entry for new companies. And in the case of agricultural subsidies we see that public funds are often used by large, corporate recipients to buy out their smaller competitors.

3. By reducing market competition, subsidies reduce incentives to innovate or become more cost and energy effective.

4. Government mandated social goals (minority ownership etc.) that usually accompany government subsidies further erodes the efficiency of subsidized industries.

5. In general, when private finance is not willing to provide capital for a company, we should be very skeptical of the soundness and sustainability of that company and its goods and services.

6. On the rare occasion in which a subsidy is wisely conceived and administered, it will inevitably outlive its economic and social usefulness. Just look at the farm subsidies that were introduced by FDR during the Great Depression to assist poor farmers - not only have they outlived their usefulness by over 60 years, they have continued to grow and skew towards larger agro-corporations.

So, while I see the merits of fighting environmental degradation, I am very skeptical of the power of government subsidies to produce positive economic outcomes, including the creation of jobs. Max Schulz believes that the best way to a greener and more prosperous future would be for the government to simply set goals and parameters for the private sector (such as carbon caps) and let market competition do the work. But, what can we expect from an administration that claims that birth control and bridges to nowhere are economic stimuli?

Saturday, March 21, 2009

One frequent complaint levied against the Bush administration was that large national and multi-national corporations held too much political influence. Many "progressives" were drawn to Obama by the belief that his administration would entail a move away from entrenched corporate interests towards the public good. A close look at Obama's staff shows that this is very far from the truth. Many members stem from organizations that represent powerful multi-national corporate interests and organization that most "progressives" deemed detrimental to our nation's economic, political and social welfare.

Before I continue I must clarify that I find nothing inherently wrong with large corporations. In a milieu of economic freedom, a company only grows large when it provides desired goods and services to the public. Corporate interests only become harmful when their influence directs the state to provides them public funds (subsidies), protection and privileges. And clearly this is only possible in a state the excessively intervenes in the economic and social life of a nation.

Of all the members of the administration, none so strongly represent entrenched corporate interests as Timothy Geithner, the Secretary of Treasury. He was a member of the Bilderberg Group, The Council of Foreign Relations, The Trilateral Commission and the CEO of the Federal Reserve Bank of New York, director of policy development for the IMF. member Group of Thirty,

A close second is Paul Volker, a member of Obama's Economic Recover Advisory Board, who was also a member of the Bilderberg Group, the Council of Foreign Relations, the Trilateral Commission and the President of the Federal Reserve Bank of New York during the Carter and Reagan administrations, G30 Member,

There is not necessary anything nefarious about the Bilderberg Group, Trilateral Commission or the Council of Foreign Relations, but it should raise an eye when so many members (Hillary Clinton, Lawrence Summers, Tom Daschle, Kathleen Sibelius, Richard Holbrooke etc.) of any administration share ties to the same powerful economist organization. And it diminishes Obama's claims of change when these very same organizations were so dominant in the Bush administration.

In addition, the Obama administration is filled with former lobbyists that represented major corporate interests, including many that "progressives" adamantly opposed. Obama staff members have lobbied for: The American Petroleum Institute, British Petroleum, Freddie Mac, Walmart, pharmaceutical companies and banks including some direct recipients of bailout funds, such as Goldman Sachs. And needless to say Mr. Obama was among the largest recipients of funds from AIG.

So, clearly large corporate interests are just as prominent in the Obama Administration as they were in the Bush Administration. The only difference is that Obama has vastly increased the transfer of public funds to his corporate allies. As time goes on the growing gulf between Obama's rhetoric and reality will become more apparent and more distasteful, especially to the well informed "progressives" that were seduced by his promises of change.

Friday, March 20, 2009

Recently during a discussion on the state of health and welfare in the United States, the
ex-Surgeon General, Dr. Koop was asked to comment on Obama's health. Dr. Koop responded "while President Obama watches his diet and maintains a regular regimen on exercise, he does engage in some risky and unhealthy behavior. It was brought to my attention that during the election campaign, a top member of Obama's staff had phoned Canada's ambassador to the US, Michael Wilson, to warn him that Obama would speak out against Nafta and to assure him that the harsh criticism would only be campaign rhetoric and should not be taken at face value..."

I must warn President Obama about the well documented dangers of Rectal-Vocalization; research shows that talking out of your ass is harmful to your health, as well as that of the public..."

By analyzing budget figures for the last 106 years I arrived at Five indisputable laws of government growth:

1. If left unchecked the modern state will continuously grow, voraciously consuming an ever greater share of our economic output. In simple terms, no matter how fast the economy grows, it will always be outstripped by the growth of government spending.

Between 1903 to 1948, the GDP expanded 10 fold (1,039.38%), from $25.9 billion to $269.2 billion, while government spending expanded 31 fold (3,128.97%), from $1.76 billion to $55.07 billion. Government spending as a share of the GDP grew from 6.8% to 20.46%.

And from 1989 to 2009, the economy grew by 260.57%, from $5,484.4 billion to $14,291.0 billion, while government spending expanded by 356.14% from $1,794.49 billion to $6,390.94 billion. During this time Government spending grew from 32.72% to 44.72% of the GDP.

2. As the growth in government spending outstrips economic growth, so shall the national debt expand both in absolute terms and as a percentage of the economy.

In 1903 the national debt was 8.5% of the GDP or $2.2 billion in absolute terms. During WW II it surged to 121.2% of the GDP, dropping to a post war "low" of 31.67% of the GDP in 1974 or in absolute terms $475.05 billion.

But, from 1974 to 2008, the national debt grew from 31.67% to 69.93% of the GDP, or in absolute terms from $475.05 billion to $9,986.49 billion (21 fold).

And through Obama's great changes, the national debt grew from 69.93% to 88.90% of the GDP, or in absolute terms from $9,986.49 billion to $13,247.99 billion.

And according to government projections, by 2010 federal debt is projected to expand to 94.47% of the GDP, or in absolute terms $14,077.92 billion.

3. As the growth of government spending expands as a percentage of the GDP, the growth potential of the productive economy will decrease. This combination accelerates the expansion of the national debt.

4. If left unchecked, government regulation will continuously expand. Under (so-called) conservatives this growth is merely slowed and under committed "progressives" the growth is accelerated. Economists are in agreement that an increase in the regulatory burden equals a net cost to the economy.

In 2001, under the "de-regulatory" administration of George W. Bush, some 64,438 pages of regulations were added. And in 2007, more than 78,000 new pages were added. This equals a regulatory growth of nearly 70%. We can only imagine what Obama will accomplish.

Between 2000 to 2004 the direct cost of regulation (the budget of federal regulatory agencies) grew from $27 billion to $37 billion or (adjusted for inflation) 36%.

And between 2000 to 2004 the financial burden of government regulation grew from $545 billion to $648 billion or (adjusted for inflation) by 19%.

5. As government spending increases, the rate of return dramatically decreases.

For example, between 2001 - 2006 the Department of Education's spending on elementary and secondary education increased by 40% and between 1995 - 2005, federal spending on higher education increased by 100%, yet by no measure has the quality of education improved during that time period. This presumably stems from the fact that a large portion of resources are consumed by government bureaucratic structures.

By every measure the historic growth of government spending, the federal deficit and the regulatory burden is unsustainable and will have disastrous economic consequences. And the only change that Obama has heralded is accelerated government growth that will only hasten the head on collision between political desires and economic realities.

The only way to avoid this inevitable disaster is through a return to the constitutionally mandated principles of limited government established by the founding fathers.

Thursday, March 19, 2009

Regardless of noble rhetoric, there are always dark undemocratic impulses in the push to expanded state power over economic and social life. In most cases, fear mongering is the preferred tool. Usually it's hidden behind a democratic mask, but occasionally it's ugly, undemocratic face peeks out. During hearings on the bailout, Representative (D-California) Brad Sherman stated:

The only way we can pass this bill is by creating and sustaining a panic atmosphere, that atmosphere is not justified...many of us where told in private conversations that if we voted against this bill that the sky would fall...and a few members were even told that there would be martial law in America if we voted no.That's what I call fear mongering, unjustified, proven wrong, fear mongering. We got a week, we got two weeks to write a good bill. The only way to pass a bad bill keep the panic pressure on..."

Wednesday, March 18, 2009

Here is some crazy talk that wacky radical Ron Paul (excerpts from his speech before a senate hearing on Fannie Mae and Freddie Mac) dating from September 2003:

Today, I will introduce the Free Housing Market Enhancement Act, which removes government subsidies from the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the National Home Loan Bank Board.

This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital.

More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt.

The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.

Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.

Despite the long-term damage to the economy inflicted by the government's interference in the housing market, the government's policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.

Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.

No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.

Mr. Chairman, I would like to once again thank the Financial Services Committee for holding this hearing. I would also like to thank Secretaries Snow and Martinez for their presence here today. I hope today's hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers. Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market. I therefore hope this committee will soon stand up for American taxpayers and investors by acting on my Free Housing Market Enhancement Act.

This week's recipient of the Jimmy Carter Prize For the Advancement of Douchebaggery is Congressman Barney Frank. As a ranking member and now chairman of the house financial services committee, Mr. Frank spent years defending Fannie Mae and Freddie Mac against efforts to impose greater oversight and regulation and downplaying concerns about the financial soundness of these deeply flawed government organizations. Yet, Mr. Frank has the gall to blame the housing crisis on the "failure of unfettered capitalism" and "de-regulation."

Believe it or not, one of the Bush administration's few moments of clarity and good judgement was it's multiple calls to increase regulation and oversight of Fannie Mae and Freddie Mac.

In 2001 Bush stated that size of mortgage giants Fannie Mae and Freddie Mac is a potential problem because financial troubles in either one of them could cause strong repercussions in financial markets.

In fall of 2003 the Bush administration pushed congress to create a new federal agency to regulate and supervise the Fannie Mae and Freddie Mac. John Snow Treasury Secretary stated "we need a strong, world class regulatory agency to oversee the prudential operations of the GSE (government sponsored enterprise) and the safety and the safety and the soundness of their financial activities."

As a ranking member of house financial services committee, Congressman Barney Frank vigorously blocked efforts at greater oversight and regulation stating:

"These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis. The more people exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses, which I do not see, I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios, but the more pressure there is on these companies, the less we will see in terms of affordable housing.”

In 2005 the Bush administration once against pushed for greater oversight of Fannie Mae and Freddie Mac. With Bush's full support, Alan Greenspan stated:

"Enabling these institutions to increase in size - and they will once the crisis in their judgement passes - we are placing the total financial system of the future at a substantial risk. If we fail to strengthen GSC regulation we increase the possibility of insolvency and crisis."

This bill was voted against by Congressman Frank and his democratic allies. Of course we can be certain that this has nothing to do with the campaign contributions that Frank ($40,100), Christopher Dodd ($133,900), Barack Obama ($105,849) and Hillary Clinton ($75,500) from Fannie Mae and Freddie Mac. That's certainly a lot of change that we can believe in!